Digital signatures on the way, eventually

Dick Satran

SAN FRANCISCO: Don't expect to be clicking on the dotted line overnight now

that the President has signed a bill that makes digital signatures legally

binding.

E-commerce specialists say that the law will have far-reaching effects over

time, eliminating tons of paper work and saving billions of dollars on

transactions ranging from mortgages to stock purchases. But the immediate impact

won't be easy to see.

Even as President Bill Clinton signed the bill into law using an electronic

card Friday, he needed to pull out a quilled pen to make a physical signature,

just to make sure the act was legal.

Future electronic signatures, though, will at least have the weight of

federal law behind them. The bill passed by Congress eliminates legal barriers

to using electronic technology to form and sign contracts, collect and store

documents and send and receive notices and disclosures.

Most businesses, though, are not equipped with an infrastructure to make

digital signatures work in the real economy. While the technology is already

well developed for verifying and securing transactions electronically, it's not

widely deployed.

"It's not going to be an overnight sensation," said e-commerce

specialist with Chicago-based law firm Wildman, Harrold, Allen & Dixon,

Anthony Abboud. "But now companies have been freed up to conduct business

more electronically and this will drive them to do it."

Lines of code



Some companies already have been using digital signatures, which are heavily
encrypted bits of unique computer code that can represent physical signatures.

Some companies also offer digital "snapshots" of consumer's

signatures, which can also be converted into secure codes.

But even consumers who shop frequently online are not likely to start using

these virtual signatures anytime soon.

"It will probably take five years or so before they become

commonplace," said Abboud.

Businesses, though, are likely to step up their efforts to put more paperwork

into electronic form, since it can save them money. The law itself does nothing

to create federal requirements or repositories for signatures. That will be left

to the marketplace, as will the issue of creating security surrounding digital

transactions.

Still, by recognizing the right of businesses and consumers to agree to

digital binders, the law could speed up the process of putting digital

signatures into play.

"This will make all kinds of financial transactions faster and

easier," said Brooks Fischer, vice president of corporate strategy at

Quicken.com owner Intuit Inc., a leading online provider of tax software,

mortgages and insurance.

Big-ticket items



The first area in which the digital signatures are likely to make a mark are in
purchases of big-ticket items like homes and cars that require large amounts of

paperwork to complete, especially when bank financing is involved. Companies

that can digitize those deals could win customers with faster and cheaper

service,

Corporate enterprises, too, are ripe for digitization, since documents with

signatures affixed are costly and time consuming. Already, the Utah-based

technology company iLumin Corp. claimed on Thursday the first end-to-end online

home purchase. Utah allows digital signatures in its existing state law.

But e-commerce experts believe that it will take some time before routine

retail transactions will be handled by digital means. Eventually, though, it

will happen, they say. They see a time when a thumbprint that's recognized by a

credit card company could suffice to buy an item in a store equipped with a

thumbprint scanner, for example.

Security will play an important role in the development of e-signatures,

experts say. "A single well-publicized case of fraud using digital

signatures could scare people from using them," said Abboud.

But the marketplace could also help meter out the right level of security for

each transaction.

"A higher level of security will cost more," said Brent Israelsen

of iLumin Corp. "You have to look at the type of transaction–if it's

somebody buying a fishing license online for $5, it probably doesn't matter

much. If it's a doctor renewing a medical license, you want to be more careful

about how it's done."

(C) Reuters Limited 2000.